WEBVTT - Qualcomm Outlook Tops Estimates After Phone Demand Picks Up

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 2>Tim Steneveek on Bloomberg Radio.

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<v Speaker 3>I want to talk a little bit about those Qualcomm

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<v Speaker 3>earnings and also the results that we got from ARM Holding.

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<v Speaker 3>Let's get to it with Jackie Devalos. She follows the

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<v Speaker 3>tech sector for us here at Bloomberg and she joins

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<v Speaker 3>us now. So Jackie, let's start with Qualcomm, because we

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<v Speaker 3>definitely did see a big bump up in the aftermarket trade.

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<v Speaker 3>Tell us about the results and what stands out for you.

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<v Speaker 1>Well, there's a few things here that investors were looking for,

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<v Speaker 1>and the first really starts off with the forecast. The

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<v Speaker 1>company said it's going to be bringing in somewhere between

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<v Speaker 1>ten point five billion to about eleven point three billion.

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<v Speaker 1>That beat estimates, which was coming in at the lower

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<v Speaker 1>end of ten point five billion, so that was a

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<v Speaker 1>solid beat. Profit also is expected to come in at

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<v Speaker 1>around three dollars in a nickel per share, also beating

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<v Speaker 1>expectations by margin. But overall, these higher level results represent

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<v Speaker 1>kind of a recovery in this very important part of

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<v Speaker 1>the business for the company, which is it's smartphone sector.

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<v Speaker 1>China in particular has been kind of a question mark.

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<v Speaker 1>You know, you've seen this slump in this in the

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<v Speaker 1>smartphone market broadly. But Qualcom said that China sales of

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<v Speaker 1>some of its Android based phones actually increased about forty percent,

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<v Speaker 1>which is a really bullish sign for the company. Of course,

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<v Speaker 1>Qualcom gets sixty percent of its revenue from the smartphone business,

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<v Speaker 1>so overall, this is a good sign that it is

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<v Speaker 1>kind of kind of overcoming the broader challenges in that market.

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<v Speaker 2>Can we look at Apple as like, look at this

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<v Speaker 2>as a bell weather for Apple? I mean, look, we

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<v Speaker 2>already heard from Apple, but this is a company, right

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<v Speaker 2>that gets twenty seven percent jackie of its revenue from

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<v Speaker 2>from Apple, twenty one percent from Samsung, and then it

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<v Speaker 2>goes down to Shaumi at five point five percent. So

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<v Speaker 2>can does this tell us? Does it give us any

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<v Speaker 2>insight into how Apple's doing?

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<v Speaker 1>You know, it could offer some signs there because you know,

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<v Speaker 1>if anyone's going to feel at first it is a

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<v Speaker 1>company like Qualcom, so of course we can kind of

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<v Speaker 1>gather perhaps an early sign there that perhaps that market

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<v Speaker 1>is seeing a little bit of a recovery. We'll just

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<v Speaker 1>have to kind of wait and see for Apple's results

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<v Speaker 1>in the meantime, just kind of knowing how this kind

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<v Speaker 1>of at this part of the supply chain, what the

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<v Speaker 1>recovery is looking like. Forty percent increase, that's not nothing,

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<v Speaker 1>It's fairly substantial. So I think, you know, for other

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<v Speaker 1>businesses that depend on smartphones kind of moving over to

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<v Speaker 1>arm for example, you know, who was also incredibly dependent

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<v Speaker 1>on that, but their story is a little bit different

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<v Speaker 1>in that the bar was a lot higher because of

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<v Speaker 1>this AI expectation. Now a lot could be kind of

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<v Speaker 1>deduced that maybe investors are just kind of thinking this

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<v Speaker 1>is a little bit you know, it's run its course.

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<v Speaker 1>Its revenue numbers came in, you know, at one eight

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<v Speaker 1>hundred and forty four million, that beat expectations for this

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<v Speaker 1>for this quarter at eight hundred and ten million beat there.

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<v Speaker 1>Its revenue forecast was the midpoint was a little bit

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<v Speaker 1>lower than what investors had been forecasting. But again, I

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<v Speaker 1>think this is more of the AI story and the

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<v Speaker 1>disappointment there.

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<v Speaker 3>Yeah, yeah, yeah, Hey, listen, I'm just curious as we

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<v Speaker 3>watch these stocks in the aftermarket, and certainly we'll probably

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<v Speaker 3>maybe you know, touch on them tomorrow as well. Is

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<v Speaker 3>there let's go to Qualcom first. Is there a number

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<v Speaker 3>one question that's top of mind that you think analysts

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<v Speaker 3>need to be asking on the call.

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<v Speaker 1>I think they will want to know how lasting this

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<v Speaker 1>China recovery is. Looking they maintained their guidance for the year.

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<v Speaker 1>I think for the next couple quarters there there's a

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<v Speaker 1>lot that can change. Clearly, that market is the most

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<v Speaker 1>vulnerable out of its kind of it's entire portfolios. So

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<v Speaker 1>I think the longevity of that recovery is something they'll

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<v Speaker 1>be asking about.

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<v Speaker 2>What about ARM? Looking at shares a ARM in the

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<v Speaker 2>after hours right now, bouncing around but down about three

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<v Speaker 2>percent as we speak. As a reminder, second quarter revenue

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<v Speaker 2>came in above estimates. Again, you know, this is when

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<v Speaker 2>we're talking about a company that does chips looking at

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<v Speaker 2>revenue for a quarter of eight hundred and forty four million.

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<v Speaker 3>I know, I know, it's a different scale.

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<v Speaker 2>It's a different scale than a company like a you know,

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<v Speaker 2>if we'll hear from later this month, go ahead, Jackie.

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<v Speaker 1>One sign there that that is a positive maybe they're

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<v Speaker 1>not getting credit for is that profit analysts we're expecting

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<v Speaker 1>around thirty four cents, and they projected that in this

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<v Speaker 1>current quarter, it's going to come in somewhere between thirty

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<v Speaker 1>two and thirty six. That's kind of, you know, pretty

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<v Speaker 1>much in line. I think the big question there is

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<v Speaker 1>how much are you diversifying that revenue base, how much

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<v Speaker 1>of this is coming from AI? Is it paying off?

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<v Speaker 1>Perhaps that bar, like I said, is a little bit higher,

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<v Speaker 1>but any insight into you know, whether those profits are

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<v Speaker 1>being generated from that line of business will be fairly key.

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<v Speaker 3>All Right, We're gonna leave it on that note. Hey, listen, Jackie,

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<v Speaker 3>thank you so much for walking us through. Jackie Devalos

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<v Speaker 3>with a lowdown on both qualcommon arm holdings. As we said,

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<v Speaker 3>both of them are moving in the aftermarket.